Archive for May, 2011

Chocolate Wars by Deborah Cadbury (Douglas and McIntyre, 2010)

May 27, 2011

The cocoa bean has provided Deborah Cadbury with the ingredients for a social history, an industry history and a company history. Each could be the topic of a separate book so that the wealth of information provided acts as an appetizer for the reader to explore different main courses. Well written and documented, the book has a bibliography but no footnotes. I learned a great deal from reading the book and found myself consulting sources like Wikipedia to find out more about topics like the Quakers and Quaker capitalism, which turns out to be a form of corporate social responsibility. In the early 1900’s Arnold Rowntree warned capitalists against “the spirit of greed….unchecked by a sense of social responsibility (p.221).”

The corporate histories relate to Cadbury, Rowntree, and Fry in the UK from around 1800, but include references to Dutch, French, Swiss and US firms including van Houten, Nestle, Hershey and Mars. The last part of the book examines the takeover of Cadbury by Kraft in the US using the case to contrast the corporate philosophies of the original British families with those of modern day investors like mutual fund managers and private equity firms. The latter tend to use share prices like bets at a casino to make money in the short run. The Quaker capitalists looked on firms as social enterprises with a long time horizon but ones they would control.

Chocolate is made from white cocoa beans which are processed, dried and ground into a bitter tasting brown powder. With the oil extracted, the powder is combined with other ingredients in order to make a sweet tasting drink or solid confectionery such as a chocolate bar. The bar proved to be a cost saving way of manufacturing, storing and distributing chocolate which was initially consumed as a liquid.

The supply chain for the chocolate industry provides an early example of how multinational business evolved by way of trade and investment by firms associated with the European empires. In the 1600s, Spanish explorers found cocoa being consumed as a drink in the Americas and introduced it back in Europe where it was a hit and gradually spread throughout the continent. The cocoa bean grows in a belt about 20 degrees north and south of the equator. Today, the Ivory Coast, Ghana and Indonesia produce about 72% of world production of 3.6 million metric tons of beans with the remainder coming from Nigeria, Brazil, Cameroon and Ecuador.

In England the first chocolate entrepreneurs, Cadbury, Fry and Rowntree are described as Quaker capitalists whose beliefs included the view that businesses should be operated for the benefit of the various stakeholders especially workers, suppliers and the community as well as the owners. When it was found that slaves were used to harvest cocoa in Portuguese colonies after the abolition of the slave trade and slavery, these Quakers were active in lobbying to end this practice.

Quakers preached a doctrine of non-violence, and acted to combat the poverty and slum dwellings of the industrial revolution in the UK. The Cadbury family built the town of Bournville in the countryside outside Birmingham with green spaces and affordable modern housing for its workers. This garden city, now surrounded by the growth of Birmingham, still exists and can be seen, using Google Earth, with its buildings and parks in the south-west part of the city.

Reading the book requires following a series of strands over time relating to the development of several generations of families associated with each of the firms. Tables and maps would aid the writer in keeping track of the persons, firms, places and products discussed. In all other respects, the book is extremely well researched and written and I would highly recommend it for the general reader as well as for students of economics, especially those interested in business history.